A comparison of the development strategies of India and China and their rates of poverty reduction

India and China are both touted to be the next economic superpowers.  As both countries are home to close to a third of the world’s population, they have enormous human resources with which to capitalize on.  Alongside this natural advantage in terms of human resource, the domestic and foreign policies of both nations have been conducive to economic growth over the last few decades.  While China started the process of economic liberalization earlier than India, the latter has caught up with its Asian neighbour in quick time.  In this context, political analyst Fareed Zakaria’s assessment that we are entering a “post-American world” is a valid one.  In the six decades since the end of the Second World War, the United States had dominated global politics and had also attained the status of an economic and military superpower.  But with the onset of globalization, countries with abundance of cheap labour such as India and China are primed to assume the leadership position in another 10-15 years.  India has a huge pool of skilled workers who have the added advantage of proficiency in English language.  The re-election of Manmohan Singh as the Prime Minister is also a positive development from an economic perspective, for it was he who initiated India as a participant in globalization in 1991 (Winters & Yusuf, 2007).  China, on the other hand, started participating in the process of globalization much before India did. As a result, their economy is more than twice that of India and is catching up fast with that of the United States and Japan. Some of the South American countries such as Venezuela and Russia (rich in oil resources) and Brazil (rich in natural resources) also pose a threat to American domination of global economy.  In fact, American media believes that the threat will come from BRIC countries (Brazil, Russia, India and China).  The South East Asian region also poses a collective threat.  The rest of this essay will focus on the development strategies adopted by China and India and how successful they have been in reducing poverty.

Ever since the communist revolution of the late 1940s, and the subsequent formation of the Chinese Communist Party (CCP) in 1949, many positive developments have taken place both within the party as well as for Chinese citizens.  The CCP and its cadres “are changing in ways that make creative solutions to political governance problems feasible than a repeated violent reaction to social change, as in 1989” (Smith, 2003).  While progress and reform is on the party agenda, its leadership still retains useful traditions and customs.  A case in point is the utilization of nomenklatura system for selecting party leaders.  Its critics will point to its shortcomings, including its inability to curb corruption within the party ranks.  But the nomenklatura system was not devised to deter corruption.  Also, the cadre responsibility system was meant to act as an analytical tool for zeroing in on the primary goals of the party and assessing the success of various policy initiatives; and it has proved equal to this stated objective (Winters & Yusuf, 2007). As a result,

“Since 1978, it is estimated that more than 200 million Chinese have escaped absolute poverty, as a result of Chinese government initiatives, bringing the share of China’s total population living in absolute poverty to less than 10 percent,(1) This significant reduction of absolute poverty, from large numbers of poor spread widely across the countryside to pockets of poverty in remote resource-deprived areas, required a change in the government’s agriculturally-focused approach to reducing poverty.” (Bramall, 2007)

The history of China over the last sixty years has not been without moments of indiscretion and impasse.  When in September of 1949, the communist revolution was complete and the CCP ascended to power, the people of China were relieved and also hopeful;  Relieved of closing a conflict-ridden chapter of their recent history and hopeful of a brighter future.  It can safely be said that their hopes were fulfilled to a large extent as a result of the imaginative economic policies adopted during the last three decades.  The CCP has to be credited for bringing about a degree of economic and political stability in the half century of their reign.  From its early days, when the party and its members were still learning the ropes of governance it has now become a sophisticated and well coordinated political machine.  The integration of the erstwhile closed and protectionist Chinese economy with that of the larger global economy in the last three decades is the pinnacle of the CPC rule (Mcmillan & Powles, 2009).

While Mao Zedong was the father of the Communist China, his successor Deng Xiaoping must be credited for the nation’s progress toward prosperity.  Under his leadership, the party ratified and implemented the “Four Modernizations” program that would propel China onto the global stage, where it is fast approaching the leadership position.  This ambitious program of sweeping economic reforms opened China to the outside world.  But the last decade has seen deterioration in such optimism, as “the very limited agricultural resource base and lack of basic rural infrastructure, coupled with a deplorable health status and level of educational attainment, not only constrain the effectiveness of government poverty reduction programs in these areas, but also severely hamper single-sector agriculture and rural enterprise development interventions.” (Herd & Dougherty, 2007)  Hence, in order to improve the effectiveness of poverty reduction strategies, “revitalized social services should be integrated with improved agriculture and rural enterprise development programs. The most cost-effective large-scale poverty reduction approach may be to expand opportunities for out-migration of surplus labour from poor rural areas to more developed rural and urban areas, where there is stronger demand for unskilled workers.” (Harris-White, 2003)

Coming to the question of economic strategies in India, since the starting of the liberalization and deregulation phase, the country has largely come to depend on private corporations for infrastructure development.  The successive governments during the last 15 years have been reluctant to initiate infrastructure projects – as raising taxes would result in unfavourable public opinion.  But a country’s economic advancement is inevitable linked to its infrastructure and one cannot manifest without the other.  This flaw had already started to expose some limitations.  The meagre budgetary allocation for highways and railroads had led to a substandard transportation facilities.  Government investments in energy, water-treatment and sewage-treatment plants had been disproportionately low.  Such a scenario will not lure trans-national companies to set up operations in India as it had done in the past.  They may alternatively look east towards countries like China, Taiwan and Philippines that are more advanced in this regard (Harris-White, 2003).

While the professional classes benefited from the period of economic bonanza, the overall picture is not so pretty.  The percentage of people living below the poverty line had not declined.  While consumer’s individual demands are being supplied by the market, their collective needs such as a clean environment and a robust health-care system are not striven towards.  The income gap between the most affluent and the down-trodden sections of the society had widened during the last decade.  These factors have led to an air of tension and ill-will among the populace. In some of the above mentioned aspects China and countries in south-east Asia offer better standards (Herd & Dougherty, 2007).  Unless the policy makers in New Delhi make necessary changes in the development model and adopt a comprehensive notion of prosperity and well-being, the recent flourish may ultimately prove to be no more than a flash in the pan.  Morevoer,

“The elimination of widespread poverty, as in India, requires both rapid economic growth and greater economic equity. In the context of a distribution of wealth which is initially very unequal, a rise in the level of per capita income without any significant improvement in its distribution will leave most people in poverty for a long period of time. And in the context of an initial level of per capita income which is close to subsistence, a redistribution of income without much economic growth offers very limited opportunities for economic improvement.  Poverty in India can be overcome only by a very substantial growth of per capita income achieved in the context of a significantly more equal distribution of income.” (Srinivasan, 2003)

The Indian economy has been growing at a phenomenal rate over the last few years. It is expected to maintain that rate in the near future too, which would make it an economic superpower in its own right.  While this turnaround in India’s economy is a source of celebration for the world community, there are some genuine reasons for worry as well.  The foremost of the concerns is inflation.  The high growth is matched by a high inflation inducing confusion in the minds of consumers.  The rising prices of commodities had sapped much of the initial optimism.  Adding to the concern is the likelihood of uneven economic development in the future.  This situation is likely to generate popular opposition among the masses and “sooner or later the poor people of India will succeed in organizing themselves so as to bring about the fundamental redistribution of effective power without which poverty in India will never be overcome.” (Hilton, 2006)

Finally, one of the key objections directed against economic liberalization policies of both China and India is their tendency to create wealth for a few and poverty for the many. It is a well documented fact that the Chief Executive Officers of many MNCs, who are at the forefront of globalization draw unreasonably high salaries, while workers in lower positions get paid only a fraction.  In the thirty odd years since the ascent of globalization, the inequalities in distribution of wealth has kept widening, leading to greater discontent among the large majority of people.  In this regard, the proposal made by Indian born economist Amartya Sen makes much sense.  Sen had done extensive studies on poverty and famine in Third World countries including India and China and has come to the conclusion that globalization is not ineffective in and of itself.  He argues that unfettered capitalism across national borders is to be encouraged, but the accrued wealth has to be more evenly distributed among the people (Henry, 2009).  In other words, what Sen proposes is a benign form of globalization, whose benefits reach all strata of society.  Renowned economist Joseph Stiglitz is also not in favour of globalization as it exists today.  He condemns the prevailing system as following market fundamentalism and suggests that proper governmental regulation is essential for reducing disparities in wealth and also to reduce poverty levels (Henry, 2009).

References:

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